Europe Might Just Sidestep A Recession

Europe Might Just Sidestep A Recession

about 1 year ago2 mins

Mentioned in story

Economists at investment bank Goldman Sachs no longer see a recession hitting Europe, according to news out on on Tuesday.

What does this mean?

Only a few months ago, gloomy economic fortune-tellers were predicting a long spell of penny-pinching pain for Europe. But good old Goldman’s gone and started 2023 with a sunny, contrarian take, saying that things mightn’t get so grim after all. The firm thinks the double blessing of falling gas prices (thanks, balmy January) and a reopened China will give Europe the leg-up it needs, helping the region dodge a recession and grow its economy by 0.6% this year. And while that will probably mean the European Central Bank’s rate-hiking antics continue for a while, at least the region's long list of negatives looks a whole lot shorter.

Goldman Europe recession
Source: Bloomberg

Why should I care?

For markets: Happily ever after.

If Goldman’s right, Europe could finish the year on a pretty strong footing. Picture this: it’s December 2023, inflation’s under control, and interest rates are sitting at a tolerable 3 to 4%. Now Europe’s shipping exports to China by the boatload again, and the bloc is managing to wean itself off Russian fossil fuels. Admittedly, this is a best-case scenario, but it's not inconceivable – so if you agree with Goldman's predictions, European stocks could be a cheap and clever bet.

Eurozone inflation

For you personally: One step ahead.

Of all 2022’s surprises, one in particular stands out: European gas prices ending the year lower than they were before war broke out. And if Europe does avoid a recession, that’ll be yet another turn up for the books. The point is this: going against the crowd won't always yield results, but surprises crop up more often than you think – and bearing that in mind can help keep your portfolio positioned for the future, not stuck in the past.

European gas prices
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